The Parliamentary Select Committee on Mines and Energy yesterday urged the House to approve a contract agreement between the government of Ghana and AGM Petroleum Ghana Limited to enable the company begin its operations at the South Deepwater Tano Contract Area.

The exploration and production license when granted would allow the private petroleum company, to undertake petroleum operations within the offshore Tano basin which is located in the Western part of the Ghana Offshore Sedimentary Basin.

The basin has an onshore extension that covers an area of about 2500 kilometers cube. The contract area, with a size of about 3482 kilometers cube, lies in a water depth ranging from 2000 to 3500 meters.

A report by the Committee on Mines and Energy on the contract which was laid before the House for approval stipulates that the company would operate in the area for a seven-year period.

The report said during the initial exploration period, the minimum expenditure to be expended by the contractor during the first phase of the project is US$259 million.

"For the first extension period, the contractor will continue to reprocess existing data and drill one exploration well at a cost of US126 million," it said.

According to the report, the company in the second extension period would further reprocess existing data as may be required and would also drill one exploration well "at a total of US$126 million."

The report also indicated that "to facilitate the establishment of programmes to train Ghanaian personnel to work in petroleum operations and to ensure transfer of management and technical skills required for the efficient conduct of petroleum operations, the contractor has committed to pay to the GNPC at beginning of each contract year, an amount of US$1 million."

On discovery of commercial production of oil under the agreement, it said the state would benefit from the agreed percentages for royalty oil, domestic and export gas as well as a corporate tax of 35 per cent.

It added that the state would also receive additional oil entitlements in the event of discovery of oil in commercial quantities.

In addition, the report said the contractor was required by Article 21.2 of the agreement to pay to the Explorco an amount of US$15 million to support capacity building at the tertiary level as agreed between the committee and the GNPC.

Under the agreement AGM Ghana a wholly owned subsidiary of AGM Gibraltar, will partner with GNPC and GNPC ExploreCo in the initial exploration and development of the block.

AGM Gibraltar on the other hand is a company jointly owned by AGR Energy AS ("AGR"), Minexco (OGG) Inc. ("Minexco") and MED Songhai Developers Limited whiles AGR Energy AS is the exploration arm of the AGR Group, which is listed on the Oslo Stock Exchange.

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